David Craig, on October 11th, 2024Friday-weekend blog
Drowning in our money
There has been lots of huffing and puffing by the chattering classes about the massive amounts of sh*t our water companies have been enthusiastically pouring into our rivers and seas. But the water companies squeal that it’s not their fault and claim that they need to hugely increase our water bills in order to have enough money to improve their networks. So let me give you the figures that many of our elites, and especially the useless fake regulator Ofwat, avoid mentioning.
When the water companies were privatised in 1989 they had no debts. Since then, the mostly foreign-owned water companies, instead of investment and improvements to infrastructure, have since taken on over £60 billion of debt, while at the same time their owners have withdrawn £85 billion in shareholder dividends and other payments. So, that’s borrowing of £1.7bn a year and shareholder dividends of £2.4bn a year. Currently, around 20% of your water bill is used just to service the water companies’ £60bn+ debt. That leaves preciously little money for fixing leaks, reducing sewage spills or investment in new infrastructure. Some of the water companies have been regularly making profits of 30% to 40% in Britain while only making 5% to 10% in their better-regulated home markets. The whole thing is a massive scam and ordinary British homes and businesses are the victims.
Thames Water, for example, which is bleating about supposedly being on the verge of bankruptcy, has been lobbying the government to let it increase bills by 40% after the company’s 35-year history of giving out £7.2bn in dividends – and racking up £14.7bn in debt. Around 28% of Thames’ revenue from bills is spent paying interest or fees on debt on average between 2019 and 2023. Thames’s high debt levels have put it on the brink of collapse while its shareholders are drowning in an ocean of our money.
However, the situation is even worse than it appears from the above figures. Some water companies, owned by foreign financial groups, have set up companies in offshore tax havens like Jersey and these companies have made loans to the UK water companies at interest rates which are comfortably above the level the water companies would have had to pay any other lender. This has allowed some water companies to make hidden and untaxed profits in the offshore tax havens of their choice. So the real amounts the water companies have extracted from British home- and business-owners will actually be well above the £85bn paid out in dividends.
Regulators without regulation
I first started writing about this massive scam in my 2008 book “SQUANDERED: How Gordon Brown is wasting over one trillion pounds of our money“.
At the time our useless fake regulator, Ofwat, was trying to pressure Thames Water to reduce its 30% (I think) level of leakage. Thames Water agreed to spend an extra £30m a year if Ofwat allowed Thames to increase prices by 21%. This £30m a year represented just 2% of Thames Water’s turnover at the time. But Thames’s German owners seem to have gleefully flipped the bird to Ofwat. They sacked about one third of their 6,000 employees to give annual savings of around £45m, paid the company’s chairman £6.3m in salary and bonuses and sold the business for over £1bn more than they bought it.
When asked by the Public Accounts Committee PAC) in mid-2007 about Thames’s massive profits while failing to fix leaks, Ofwat’s pointless boss proudly declared: “We have contemplated an enforcement an enforcement order in every year since Thames started failing”. One member of the PAC replied: “We are not interested in contemplation: we are interested in action”.
Water rip-off!
I don’t blame the water companies for their predatory behaviour. They’re business and their job is to make as much profits as they reasonably can. I blame our useless expenses-thieving, do-nothing politicians, our ignorant write-anything-for-money, prostitute supposed ‘journalists’ and the worthless, over-paid, over-pensioned, self-serving bureaucratic garbage at Ofwat for allowing this massive scam to continue for 35 years fleecing British homes and businesses while enriching the water companies’ owners.
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There is a stage that you miss out and that is the nationalisation of the water companies. I know very little about how the water companies started and where the money came from but I have the impression that the Victorian system worked. Therefore, it is necessary to look what happened under nationalisation and my belief is that it was underinvestment during nationalisation that is a big cause of the problem but that is not an excuse for the private companies failing to deal with it. Nationalisation also brought in a period where nobody knew how much water they were using and what the true cost was. Apparently, only 60% of households in England and Wales have a water meter. This is not the way to run a private company.
You say the privatised companies had no debt initially but this was because taxpayer picked up the debt.
There is a problem with all the services providers that have a regulator. We elect MPs to represent us and they have given up their responsibility to unelected regulators. That is the first problem. I also think that the regulators are mostly funded by the business that they are regulating and staffed by ex-employees of the business. This is also true in other countries and we end up with drugs from their inadequately regulated businesses, which are then not regulated properly by our own regulators. Pfizer was a declining company until covid when its share price rocketed but it is now back to where it started. Wise shareholders who knew when to sell benefitted from taxpayers money buying ineffective and unproven vaccines. Pfizer needs another invented crisis.
I’m not sure about the importance of fixing water leaks. Perhaps the rate is too high, but where they are small leaks is it really worth the cost of finding and fixing them?
I think you can blame the water company management. Their job is not just to make a profit but also to ensure that the company survives and it cannot do that if the cost and quality of its services are not adequate. But these companies know that there is no competition and the government will probably bail them out.
The banks were bailed out because if they had been allowed to fail all those with deposits would have lost their saving and those with mortgages would no longer own their homes. I’ve seen this described as privatisation of profit and socialisation of losses. The water companies are different because they have assets that can be bought. Jacob Rees-Mogg often points this out. The water companies should be allowed to fail and shareholders pay the cost of not objecting to the bad management.
But as you rightly say these problems are entirely created by politicians and the people who support them.
I saw this on the internet recently “If you’ve ever wondered whether you would have complied during 1930’s Germany, now you know.” The answer is YES. Too many have been made dependent on the government no matter what they do.
Very enlightening David. Thank you. The overall message about water, gas, electricity, train services, is that privatisation, rather than bringing the benefits the consumer was promised, has constituted an open door to unbridled greed and corruption for individuals and organisations already wealthy enough to take advantage. The “Regulators” have flagrantly failed in their duty to the consumer in this regard. As usual, the UK population will be expected to pay the price, literally, in vastly increased water and drainage charges. Indeed, we already are. Leaks most certainly should be dealt with urgently. With an acknowledged population of well over 65 million, to which can be added at least another 10 to 15 million, all washing themselves and their clothes, all drinking and cooking, all flushing the loo several times a day, while no new reservoirs are being constructed, the need to use water with reasonable care is paramount. Habits have changed too. When I was a child and young person in the 40s, 50s and through to the early 60s, people did not bath every day and apart perhaps from the elite (and “foreigners”), showers were unheard of. We “washed” daily, with soap, flannel and a basin of water. Many houses did not have a hot water supply to kitchen or bathroom; water was heated in a kettle or saucepan on the cooker or on a trivet in front of an open fire in winter. What would today’s younger generations make of that? So the need for water per capita has undoubtedly increased markedly over the past half century, while the privatised water companies have done little other than pocket enormous profits. Hope of adequate provision of water at an acceptable cost for householders is rapidly disappearing, along with gas and electricity, down the figurative equivalent of Bazalgette’s wonderful Victorian sewage system.